(Natural Human Instinct or Behaviour (9) cont. 2)
3. Loss Aversion (or guarding against loss)

Introduction
Loss aversion helps explain:
    - resistance to change
    - the default position is to assume the worst
    - performance appraisal systems are generally ineffective
    - people focus on the negatives
    - people are more concerned about losing than gaining
    - in large meetings, there are very few questions.
"...avoidance of loss is a far greater motivator to humans than the opportunity to gain..."
Andrew O'Keeffe, 2011
"...we experience the pain associated with a loss much more vividly than we do the joy of experiencing a gain..."
Ori Brafman et al as quoted by Andrew O'Keeffe, 2011
Some examples of the potential losses:
     - income
     - benefits
     - changing role following redundancies, demotion, restructuring, etc
     - social standing through social embarrassment
     - loss of routine
     - loss of familiarity
     - loss of relevant expertise as systems and processes change, etc.
NB
"...loss can even be experienced just by someone else gaining..."
Andrew O'Keeffe, 2011
Losing something can make it more desirable.
People are tend to resist change where there is potential for loss.
If lack sufficient information is lacking, the default position will be negative; the power of perceptions can over-rule reality, ie can assume the worst.
This is a survival mechanism that has evolved over the years, ie first screening of pain and danger to keep you out of harm's way.
The speed with which we classify information and loss aversion are linked:
"...When we first hear about change we instantly decide at an individual level, filtered by our immediate emotional response, whether this change for me can be classified as a gain or loss. If we decide gain, we support the change. If we detect loss, we resist. If we are uncertain......we err on the side of loss as the default..."
Andrew O'Keeffe, 2011
NB Once we classify the change, we are unlikely to alter our classification and interpret subsequent events according to that classification.
As much change causes uncertainty, most people err on the side of being anxious about the change and fearing the worst, ie taking the loss side as the default.
Myths of people resisting change
i) the belief is self-fulfilling (means that you don't manage change effectively as you could which will encourage resistance)
ii) negative sentiments are attached to the change (these sentiments can make the  organisation less change-capable)
iii) apologetic about imposing the change (leadership needs to take a more positive approach)
Realising that you are not hardwired to resist change can help open opportunities for better managing change, ie
"...Taking great care to influence the emotional reaction to how people feel when they first learn about the change so that they are more inclined to classify the change as okay and to avoid the default to anxiety about loss..."
Andrew O'Keeffe, 2011
With people concerned about potential losses during change, it is best to be 'up front' in order to avoid unnecessary fear and uncertainty. Generally, people are most concerned about:
"...1. Will I have or lose my job?
     2. Who will I be reporting to?
     3. Will the membership of my team change?..."
Andrew O'Keeffe, 2011
If there are to be job losses, it is best that the people who are impacted know first; for the changes in reporting structure, make the charts public because this will reduce the chance of any misunderstanding.
"...Staff don't have to make it up for themselves, don't have to assume the worst and don't need to gossip to try to make sense of what is happening..."
Andrew O'Keeffe, 2011
People will default to the negative classification if the avoidance of loss far outweighs the possibility of gain.
People will listen and take notice of the most negative views and this can influence their classification.
Remember:
"...It's not the change itself that's the problem. It's a question whether the change results in personal loss or gain..."
Andrew O'Keeffe, 2011
If there is any uncertainty about the impacts of the change, people will assume the loss position, ie the worst scenario.
You need to do everything to create an initial positive emotional experience. This can include acknowledging any loss at the start, ie helping people make sense of the change. This is much better than concealing or trying to diminish the loss.
"...when leaders try to spin the explanation of change it's so much more frustrating to staff and detrimental to the trust they have in you, than if the leader acknowledges that loss and empathetically understands its impact. Significantly, the acknowledgement of loss can diminish the emotional antagonism of staff..."
Andrew O'Keeffe, 2011
NB People can process and accommodate loss; however, they have a low tolerance for somebody who misrepresents the situation and doesn't give a honest appraisal of the consequences of the change.
"...we humans are quite resilient and would much prefer to receive bad news directly..."
Andrew O'Keeffe, 2011
Personal performance appraisals
As most performance appraisals tend to be awkward and defensive, some ways to better handle this include:
a) be aware that it is more than a rational and transactional exchange, it is emotional
b) as the instinctual bias is to protect against loss, a person is less likely to reveal their weaknesses (eg if a ranking or rating system is involved and any weaknesses could diminish their rating; ratings can impact renumeration, promotions, social standing (work, family, community, etc), etc.)
c) as a rating system provides a focus for a loss or potential loss, it is best handled as soon as possible (this will allow a more open and learning-oriented dialogue on other issues)
d) how you conduct review (this will impact your relationship with the staff; preparation is important; carefully consider the words you use as; rather than saying 'you have weaknesses that need to be addressed', mention that 'there are some areas that need improvement' or 'there are some areas holding you back.'
e) as most people want feedback to help them grow, be prepared to provide helpful information (this means identifying areas that they are proud of and/or they have developed; try to be in a position of agreement rather than judgement as that provides an opportunity to discuss necessary topics such as:
"...- What did I do well this last year
     - What did I not do so well and can learn from?
     - How did I develop last year and what should my development plan be for this coming year?
     - What are my personal growth and career opportunities and how do I best get ready for them?..."
Andrew O'Keeffe, 2011
Be careful of too much focus on negative(s).
Handling feedback
People respond emotionally to feedback.
There are 4 general responses to negative feedback;
i) aggression (an instantaneous defensiveness to protect against loss; people can fight frantically when threatened and aggressively defending themself)
ii) withdrawal (avoiding or escaping from the danger)
iii) immobility (freezing)
iv) submission (appeasement)
(source: Joseph LeDoux as quoted by Andrew O'Keeffe, 2011)
Remember that these range of responses are only natural.
Furthermore,
"...If the appropriate emotional response to the feedback you are providing would be defensiveness, argument or tears and you don't see something close to this response, then you should reassess what you said and how you said it because it probably means your message was missed..."
Andrew O'Keeffe, 2011
Asking questions
Generally in large meetings there are very few questions. Loss aversion helps explain this, ie there is a fair bit to lose by asking questions where you could look silly, dunb, threatening, etc.
People feel more comfortable asking questions in small groups and/or with friends.